Over the past 25 years, fluctuations in interest rates have foreshadowed major economic crises, with recent patterns showing a similar trajectory since 2022. Historical parallels suggest that the September 2024 rate cut may initiate another crisis, indicating an inevitable decline in stock prices and economic downturn despite market optimism and positive sentiments.
Since making an all-time high on 26 September 2024, the Nifty50 index corrected over the next two weeks. The correction so far has been inconsiderate, with the index giving up just the gains made in September 2024. Meanwhile, the S&P 500 index is at its all-time high, after remaining sluggish and volatile in the previous three … Continue reading Changing Global Economic Trends: What it means for Stock Prices
The prolonged period of low market interest rates led to risky financial behavior and accumulation of risk in the financial system, particularly evident in the high growth of unsecured retail loans by NBFCs. These easy times, with low interest rates and high credit growth, have raised concerns about financial stability. The push for rate cuts amidst robust economic growth and high inflation may exacerbate these excesses and make the system more fragile.
The purpose of the financial system is to support the ‘real’ economy by facilitating transactions, majorly through credit and money supply. But on certain occasions, the financial system would dissociate from its principal purpose and start functioning for its own sake – its expansion and survival. Unfortunately, the financial system gets seized by many ill effects if dissociated from its primary purpose. Precariously high asset prices, credit booms, capital misallocation, and financial fraud are a few of the ill effects.
"Interest rates play a crucial role in shaping economic and financial conditions, influencing spending, saving, and investment behaviour. As we transition from ultra-low interest rate environments, it's crucial to consider the long-term consequences of these changes on asset prices and the overall economic prosperity."
The outlook discusses the current market conditions, including the rise in gold prices, the US 10-year treasury yield, and India's volatility index. The author expresses concern about the recent spike in gold prices and its potential implications for the financial markets soon.
Stubborn resistance to oxidation, unusual density, and ready malleability – these simple natural attributes explain all there is to the romance of gold. Peter L. Bernstein, The Power of Gold: The History of an Obsession Gold Prices and Market Foreknowing Analysing the Implications of Recent Gold Price Spikes and What They Could Mean for Investors. … Continue reading Gold Prices: An Ominous Aura
The Indian stock market is currently in a bull market that is more than twenty years old. It began in 2003 and since then the Nifty50 index has multiplied eleven times – an annualised return of 13 percent. However, the rise in stock prices wasn’t smooth and linear. There were occasional price corrections; two of … Continue reading Has the Market Run Too Far Ahead?
The Disparity between Stock and Money Markets: A Cause for Concern This week was an eventful one. On Tuesday, the IMF in its Jan. 2024 World Economic Outlook (WEO) update, revised upward the world economic output growth to 3.1 percent – 20 basis points higher than projected in its Oct. 2023 outlook. India’s GDP growth … Continue reading Disparity in Markets
Navigating Uncertainty: The Outlook for Indian Equities in 2024 India Outlook 2023 was a great year for the Indian stock market. All key market indices are at their all-time highs now. Nifty 50 is up 20 per cent for the year. The midcaps and small caps outperformed with gains of 46 per cent and 55 … Continue reading A Sceptical Perspective
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